UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva, Sean Cope and Marta Almeida, DLA Piper Middle East LLP
8. Tax 8.1 VAT and Sales Tax
In Dubai, a municipality fee applies on the occu - pation of property, calculated as 5% of the annu - al rent or 0.05% of the value of the property (in the case of ownership). Value is generally treated as the amount for which the current occupier bought the property. 8.4 Income Tax Withholding for Foreign Investors Income earned from immovable property in the UAE by foreign individual investors, who are considered UAE taxpayers based on the criteria provided in 2.10 Taxes Applicable to a Transac- tion , is currently not subject to any withholding tax in the UAE, as the rate is set at 0%. It is important to note that this rate might change in the future. Foreign legal entities that derive income from immovable property in the UAE will be con - sidered to have a nexus in the UAE. Non-resi - dent persons that have a nexus in the UAE are required to register for CIT purposes. 8.5 Tax Benefits There are no specific rules under the UAE CIT regime regarding depreciation deductions for real estate. In the absence of specific rules gov - erning the depreciation of real estate assets, for tax purposes depreciation rules will default to the guidelines set out under applicable account - ing standards (ie, the International Financial Reporting Standards).
Since 1 January 2018, VAT at the standard rate (5%) applies to the sale of commercial property (whether such property is newly constructed or not). If the transaction can be treated as “transfer of a going concern” , the transfer shall not be considered a supply for VAT purposes (hence no VAT will arise). The conditions for obtaining this treatment could be complex and require appro - priate legal analysis. 8.2 Mitigation of Tax Liability No methods are currently used to mitigate trans - fer, recordation, stamp or other similar tax liabil - ity on acquisitions of large real estate portfolios. For CIT, various forms of business restructur - ing relief are available. These types of relief can significantly reduce the tax impact of intra-group transfers or transfers of a business (or an inde - In Abu Dhabi, a municipality fee applies to any - one leasing property, except UAE nationals. Fees are calculated at 5% of the rent (with a minimum of AED450), which is paid to the Abu Dhabi Distribution Company or Al Ain Distribu - tion Company on behalf of the DMT, in addition to water and electricity bills. Registration for the fees occurs automatically when the lease is reg - istered with Tawtheeq. pendent part thereof). 8.3 Municipal Taxes
1091 CHAMBERS.COM
Powered by FlippingBook